RFID phones: So near, yet so far

That humble mobile phone could soon become an indispensable tool for a range of business applications, thanks to a new wireless technology.

Near-field communication (NFC), the short-range wireless standard based on having a radio frequency identification (RFID) chip embedded in the handset, is being tested extensively in many countries.

In Japan, for example, the technology has been successfully employed by wireless carrier NTT DoCoMo to allow customers to use their cell phone as a mobile wallet.

Industry observers believe that NFC has huge market potential.

Jay Hotti, chief technology officer at Network For Electronic Transfers Singapore (NETS), is convinced that NFC will be a powerful tool for both the mass markets as well as the enterprises. The electronic payments provider last year unveiled a proof-of-concept RFID-based mobile phone application which allowed users to make contactless payments with their handsets.

"With the high penetration rate of mobile phones, NETS believes that NFC would become a mainstream technology offered by major telcos," said Hotti in an e-mail interview with ZDNet Asia.

According to Hotti, there are various applications business organizations can build to leverage NFC-enabled mobile phones.

"Enterprises can look at introducing concepts such as electronic coupons or RFID tagged advertisements for discounts, as well as peer-to-peer transactions with other NFC-enabled devices," added the industry veteran. "They can also facilitate the convergence of services like equipping mobile phones with ATM functions."

Bernard Ng, a software developer with RFID and Java development experience, thinks that mobile phones with RFID are a great fit in the enterprise environment as the technology offer an extra layer of security for users.

Said Ng: "Mobiles are also already in use for two-factor authentication for Internet banking, Having NFC just makes it more convenient because it is much easier and less error-prone to place the phone near a reader than to transcribe a one-time password (OTP) embedded in an SMS."

Ng agreed that while mobile phones can be a liability because "people use it often and some of us lose it quite easily", he also believed that it makes for a strong security token.

"The phone is actually superior because we use it often and thus detect its absence earlier and can disable it remotely. If someone removes your SIM card, the authentication should be designed to fail, and if they put it back within cell phone coverage, home base should send a message to wipe out all sensitive content, including the capability to authenticate using NFC," Ng explained.

US-based Motorola signaled its intentions for the mobile market after the company's acquisition of Symbol Technologies in September. Though it has yet to announce any detailed plans, according to a Motorola spokesperson, the company regards NFC as an "extremely powerful proposition and are actively investigating the area."

Rival Nokia, meanwhile, said it is working toward making NFC a universally accessible technology.

The Finnish handset maker previously flirted with the thought of bringing NFC to its mainstream models. Earlier this year, the company also partnered with Malaysian service provider Maxis and Visa and Maybank to trial NFC for consumer payment using mobile phones.

Gerhard Romen, head of Nokia's NFC market development, highlighted two examples of NFC working on Nokia devices, such as the Nokia 5140 and the Nokia 3220 hand phones.

The first is a security application where, for example, a patrol guard doing his rounds would simply touch the checkpoint tag with his Nokia device. "When the Nokia device vibrates, he's notified that the information has been sent to the office," Romen said, in an e-mail.

In the second example of a potential healthcare application, Romen explained that a nurse would be able to prescribe medication to a patient by placing the phone near his tag.

Romen admitted that while NFC has a high potential for both businesses and consumers, the rising number of NFC-enabled products means interoperability could become an issue.

"The current expectation by analysts is that we will see some deployments and more pilots in 2007; also, 450 million NFC-enabled devices will be in the market by 2010-2011," said Romen, quoting a study from ABI Research.

The Finnish company, along with Sony and Philips, is now part of an alliance of companies working together to standardize the NFC system, called the NFC Forum. The Forum's goal is to enable each NFC-enabled device to be interoperable with one another.